Make the most of interactivity

Small broadcasters in the Middle East have relied heavily on SMS and other interactive models rather than on advertising and sponsorship to generate revenue. Mark Hill of The Rights Lawyers lists some of the legal issues to bear in mind when structuring an interactive deal.

I|~||~||~|Anyone who has been living in or visiting the Middle East over the last year or so will have seen the obvious increase in the numbers of SMS, MMS and other interactive mobile campaigns. If the word on the street is to be believed, poor advertising sales and sponsorship or product placement arrangements have been countered by increased interactive revenues, thereby, keeping several smaller Middle Eastern broadcasters afloat. It all began a couple of years ago when we started to be approached to structure a number of content deals where content aggregators were buying up licences (usual on a non-exclusive basis as the upfront payments are a lot lower!) from the major content owners (Disney, the movie companies, owners of sports formats etc.) in an attempt to exploit those rights in the region. Before looking at some of the legal issues to bear in mind when structuring an interactive deal, let us take a look at the participants. Generally, there will be at least four players: • The owner of the TV format, the show that the interactive campaign will often be attached to. In the Middle Eastern context, this is usually the holder of the franchise or licence to the show for this region rather than the ultimate format owner; • The broadcaster who will carry the show where the campaign is linked to a TV format; • The telco i.e. the mobile company that provides the distribution platform. To hear some regional mobile companies talk, they believe themselves to be King of the Hill so far as interactive campaigns are concerned (“without us, there is no distribution mechanism”) though I’m not sure the content people would agree (“without content, who cares if you can distribute?”); and • The technology provider, who provides the technology to make the whole thing happen. Increasingly, we are seeing a number of broadcasters and telcos create their own in-house technology capability for interactive campaigns but we will continue to see a number of independent operators in the market offering this kind of service. The approach of the telcos in the region is pretty varied. Hearing one leading GCC mobile operator speaking recently, they clearly believe they have the whole interactive approach wrapped up. There are taking content, usually with little or no upfront payment, usually on an inflated profit share. One of the problems though is that it is pretty clear that companies like this are running quite a commercial risk in the way they are choosing their content, with very little or no due diligence going into the content itself or the provider. The contractual commitments that the content is clear will be pretty much worthless in many cases. Some of the newer mobile entrances into the market are being rather more sensible in their approach and are actually putting effort in to deciding how (or whether, in some cases) to enter into the world of interactive content. We see a lot of very poorly drawn contracts in this region attempting to structure arrangements relating to the use of content in an interactive context so it is probably worth running through some of the key areas: • Due diligence on the party from whom you are taking your rights from. If you are taking your licence from a company with no track record that is set up in say, Mauritius, that has no assets, perhaps that is a shelf company that can provide no evidence of ever having traded. Any warranties, therefore, that you get relating to how clean the content is might pretty much be worthless. So, do your research. • Remember to check the underlying rights – any sub-licence of interactive rights which doesn’t come from the ultimate content owner is only as good as the master licence. Think of it as being like having a head landlord. • Think of key issues under the contract such as territory, duration of licence and scope of licence. To give a few examples, if your interactive campaign is reliant on a broadcaster in the Middle East, most broadcasters operate on a pan jurisdictional basis i.e. across the Arab region, so if you only get a licence for Dubai and Kuwait, your broadcast options are pretty limited. • On duration, be careful what you are getting rights to. If it’s tied to a sporting event and you have a four year deal, are you getting interactive rights to the 2005 cup for four years or to the cup as it is to be run in 2005, 2006, 2007 and 2008? • And on scope, make sure your licence is drawn on a sensible basis. Do you really care about delivery platform (2G,2.5G,3G etc.) or just type of use (e.g. full show, highlights, clips and new service)? We are beginning to see a lot of money being made (and spent) in the pursuit of interactive revenues, so it’s worth covering the bases. ||**||